Ravi Singhania

10/1/2015 [socialsharesinghania]

There is in India today a rising tide of expectancy that government, both federal and and state, are set to push through major initiatives for making changes in labour laws. There is a realisation that labour reforms have a key role to play in improving the ease of doing business in India. The Prime Minister himself has taken the lead in discussing the Industrial Relations Bill at a national labour forum, and the Chief Ministers of the States of Madhya Pradesh, Gujarat and Maharashtra have come in the forefront to promote the proposed amendments. The new government is actively and aggressively discussing, drafting and engaging with labour groups to address their concerns.

Simultaneously, the governments of Madhya Pradesh, Gujarat and Maharashtra have moved bills in the Legislative Assemblies of their states. In Madhya Pradesh the following key amendments to the law have been proposed:-

Madhya Pradesh:

The government of Madhya Pradesh has initiated far reaching reforms in several labour related legislations principally with a view to easing the compliance and operational exemption of manufacturers from the application of labour laws.

  • Companies in Madhya Pradesh that employ up to 300 people will be allowed to retrench workers or shut shop without government approval (the current provision is for those employing up to 100 workers.)
  • Employers will have to give a higher compensation package and workers will get a three months’ notice and at least three months’ salary in the event of retrenchment.
  • In case of dispute, a worker will have to approach the conciliation officer within three years of getting retrenched.
  • Workers will be entitled to benefit of earned leave after 6 months service (presently 8 months), which could be availed of in the same calendar year.
  • Overtime hours in a quarter will be raised from 75 hours to 125 hours.
  • Women can work in night shifts at factories from 8 pm to 6 am in the morning; subject to the state government making necessary provision for their security.
  • The process for registration and grant of licenses has been expedited under several legislation, eg, under the Contract Labour Act, Building and Other Construction Workers Act, and Motor Transport Workers Act. If an application is not disposed within 30 days it will be deemed registered or approved license.
  • Industrial and Commercial Establishment will not be required to maintain multiple registers. They will be allowed to file a single return and maintain a single register.


Similarly, Government of Gujarat has passed a labour law bill on the following points:-

  • When an employee has a fatal injury which occurred at work place the victim may apply under the Employees Compensation Act 1923, before the Employees Compensation Commission within 90 days from the date of accident. Where the employees and his dependent fails to bring such application within 90 days, the nominated government officer will apply on his behalf.
  • Where any Shops and Commercial Establishment or factory employs 20 or more employees, it shall make the payment of minimum wages through bank account. This amendment will bring transparency in paying minimum wages.
  • According to the Building and Other Construction Workers Act, 1996, the definition of worker is limited to the supervisory workers who receive wages of Rs 1600 per month only. By reason thereof many of the supervisors are excluded from the applicability of the Act. Therefore the bill suggests increasing up to three times of the minimum wages for skilled workers.
  • Under the proposed law, a workman gets only a year to make an application against his dismissal, discharge, etc, for raising an “industrial dispute” to the labour court or tribunal, which was hitherto three years.
  • By the amendments, certain offences where penal provisions attract 3 months imprisonment, such offences have been made compoundable, which means settlement of a violation of the law by paying a compounding fee instead of being jailed.
  • Amending the Industrial Dispute Act, the government has fixed compounding amount for an employer up to maximum of Rs 21,000 and for labourer the amount ranges from Rs 150 to Rs 3,000.
  • For workers going on strike without informing Labour Commissioner, the compounding amount begins at Rs 150 per day, not exceeding Rs 3,000.
  • While the option of filing a criminal case is always open, out-of-court settlement and compounding scheme come into picture only if both the parties are agreeable to the same.

The bill passed by the Gujarat Assembly is now awaiting the approval of the President of India before it becomes effective. State Legislations require the President of India’s approval as labour law is a subject in the Concurrent list (both Federal and State Assemblies can legislate) of the Constitution and the State amendments must be approved by the President.


The Government of Maharashtra is also in the process of making changes in the existing legislations relating to labour, and the amendments are designed to improve the operational capability of business and manufacturing units to provide them with greater flexibility in compliance with labour laws. Of course, the changes will go through the process of legislation in the State Assembly and obtaining Presidential approval, as all state amendments are required to do under the Constitution of India

  • The government has proposed an overtime of 115 hours from the present 75 hours for workers in small-scale industrial units.
  • After Factories Act is amended, the units operating without electricity would be considered a factory if they employ 40 workers, and units operating with electricity would be treated as a factory if they employ 20 workers. The old limits were 20 and 10 workers respectively. This will exempt the smaller units from the application of the Factories Act.
  • The amendments aim to exclude more than 14,300 units from the purview of the Factories Act, 1948, and pave the way for women to work in night shifts.
  • Among the notable changes, factories employing up to 300 workers can be closed without government permission, compared with the earlier floor of 100 employees.

Federal Legislation

Labour reforms are also on the radar of the Union Government in India and a comprehensive Industrial Relation Bill is currently being debated by the government and has been unveiled to the labour interest groups and unions as part of the democratic process of consultation and transparency. The Union Government is also motivated by the object of easing retrenchment provisions and to tighten the requirements for forming Trade Unions. Some of the key provisions to be amended are as follows:-

  1. Factories employing less than 300 workers can be shut down without prior government approval.
  2. Retrenched workers should be paid an average salary of 45 days, instead of the 15 days at present.
  3. Unions can be formed only if 10 % of the employees or 100 workers, whichever is less, support the proposal. Currently, seven members can form unions.
  4. Units employing less than 40 people to be exempted from 14 labour laws as a move to give smaller units freedom from compliance with the rigors of the law. The definition of a factory is being revised by raising the threshold of minimum workers from 20 to 40 for units operating without power and from 10 to 20 for units operating with power. The micro, small and medium enterprises employing up to 40 workers will be extended the relaxation under the purview of amended law.
  5. Restriction on night shifts by women will be removed to allow women to work after 8 pm subject to provision of security by the employer.
  6. To dispense with the need to keep documentary records and registers and to replace them with electronic records by employers.

However, sensing the angst among labour groups, the Prime Minister recently assured a public forum of labour unions that the amendments would be carried through only after building up a consensus among the workers groups and Trade Unions. What is more significant is that the Union Government is openly engaging with pressure groups and hopeful of moving ahead in the chosen direction in a transparent and determined manner assuring them that labour reforms are being fine-tuned for making doing business in India an easier experience and not necessarily directed against labour. The reform process is slowly but surely moving ahead and this time with the buy in of all stake holders.



Ravi Singhania


They say nothing comes easy and there is a tag to everything. The same holds true for seeking the protection of the Sexual Harassment of Women at Workplace Act, 2013 (SHWA). There can be no two opinions that the legislations passed by the Parliament in December, 2013 are a landmark law in gender protection. Together with the Criminal Law Amendments to Sections 354A, 354B, 354C & 354D of the Indian Penal Code, (treating harassment as criminal offences) SHWA constitute a determined response to meet the challenge of Sexual Harassment of women at the workplace.

And yet the task of achieving the object of the law is a long and winding road on which the complainant must persevere through successive legal forums of the legal system with all its uncertainties and delays. The experience with this legislation is proving to be no different. The Internal Complaints Committees (ICC) of corporates must grapple with rival claims, and the dictates of legal processes, for relief the victims of sexual harassment must meet the formidable challenge of adducing evidence, for the accused the right to proclaim his innocence till proven otherwise, for the management the dilemma of compliance and the compulsions of containing the damage to the corporate brand. These are early days but the new legislation is already a battle ground rife with allegations of non-compliance, prejudice of ICC members, violations of procedure, evidence not considered, biased conduct of proceedings, and wrongful reprieve of the accused by the management.

Contrary to popular impression, the guidelines for conduct of inquires originated with the Supreme Court judgement in 1996 in the Vishaka Vs State of Rajasthan, and thereafter several decisions of the High Courts reinforced and clarified the jurisprudence on which the inquiries were to be conducted including principles of natural justice and fair play. By the time the Act was passed and notified for implementation, the legal world was acutely conscious of the pitfalls that would have to be navigated in inquiry proceedings to deal with complaints of sexual harassment. Unfortunately though understandably, the ICC’s constituted by employers comprise members who are not trained or qualified to grapple with legal requirements, which they find both cumbersome and time consuming. This makes ICC decisions easy for lawyers on both sides to pick holes in, leading to appeals in state-level industrial tribunals or through Writs in High Courts.

Among the most common and recurrent issues of challenge are the following though not the only:-

  1. Exact nature of the alleged sexual harassment -despite a comprehensive list of categories of acts defined as sexual harassment, women employees often fail to distinguish between whether the unwelcome contact was sexual in nature, or more in the nature of misbehaviour bordering on exist remark or rude behaviour by an uncouth male colleague. The misbehaviour may be an act of whispering something offensive in a barely audible tone, or perhaps in a taunting manner. Or the conduct of a male superior who is inclined to be over-familiar and tactile, or worse where the over familiarity extends to a physical touch by the boss in his room. The male may plead lack of intent, or a harmless touch, and one female colleague may equally dismiss it as harmless, and yet another female colleague may take serious exception and allege sexual harassment. People from different social and cultural backgrounds would perceive the same act differently and react differently. Ultimately, the ICC and its members would have to take into consideration the perception of the aggrieved women. There are cases where even uncouth physical contact or misbehaviour has been alleged to be sexual harassment and the accused male colleague has ended up facing action both under the SHWA and criminal proceedings by the police under the newly amended sections of the IPC.
  2. Failure to support the charge-there is currently a complete lack of understanding among female employees that any charge of sexual harassment is based on the following elements:-
  1. In which category of (i) to (v) does the act or behaviour fall as defined in the SHWA. The employee must explain in the complaint how the physical contact and advance was unwelcome in category (i); or in category (iii) explain how the remarks which she found unwelcome were sexually coloured remarks with supporting detail as to what words or language was used by the accused; in addition it has to be reported how the complainant conveyed her displeasure to the accused so as to convey to the accused that the said remark or advance was rejected or not acceptable to the employee. Complaints have often been rejected by ICC’s because the aggrieved women have failed to appreciate that the onus lies on them to substantiate the charge with relevant descriptive details. This could be due to inhibition, a sense of modesty, or other social restraints. But the law can only help the victim who has the courage to speak up and support the charge.

The last category in sub-clause (v) of S.3 has a much wider scope and includes any other unwelcome physical, verbal or non- verbal conduct of sexual nature. Quite often complainants do not think carefully or seek appropriate advice to bring out the exact nature of their experience as also of the conduct which they faced. It is extremely important to fit it into the language used in each category of prohibited conduct. Describing non-verbal conduct of sexual nature or even of verbal nature would need some memory of details so that the accusation does not sound vague under cross examination, and the complainant does not simply wilt under pressure. The best possible advice would be to keep some record of the incident and seek advice at the earliest. That is why delay in reporting such incidents in writing to HR can prove costly to the interest of the accused.

  1. How the act or conduct was unwelcome to the aggrieved employee amounted to sexual harassment. The fact that the act or behaviour was unwelcome must be signified to the accused by some words of protest or rejection though in cases where the circumstances are clear and show unmistakably the sexual nature of the act, even rejection or disapproval may not be necessary to construe that the conduct was unwelcome. Of course there will be cases where the accused will counter the charge by claiming that the conduct was invited, consensual or mutual and even reciprocated. The accused will try every trick in the trade to rebut the charge that his conduct was unwelcome. The legal test of burden of proof would keep shifting, and to prove his innocence the accused will refer to direct evidence or circumstantial evidence to establish his claim that his conduct was welcome.
  • Quite apart from the above, the complainant must gather evidence of the conduct of the accused, and of the incident, its time and place, whether it was repeated or frequent. All occasions or situations in which the acts occurred, which will all lend credibility to the charge. The victim would be well advised to speak to their friends or colleagues immediately after the incident or unwelcome act even if there is still some doubt or ambiguity regarding the intention of the accused. It does not matter that no clear pattern of behaviour is discernible, or as to whether it is sexually oriented or intended. All these bits of information would come in useful as evidence when the case demands. However, lack of evidence does not always render the complaint impossible to prove. There will be cases where the complainant’s version have been regarded as the sole testimony and acted upon by the courts, and if the ICC or the court does not doubt the complainant’s version of the conduct and is convinced about the truth of the charge or its probability, then the charge of sexual harassment may be upheld. Lack of direct evidence or witnesses must not deter or discourage the aggrieved employee from filing a complaint to the ICC or even reporting the incident orally in the first instance but as soon as possible after the occurrence. With the advent of SHWA and the spurt in complaints, there is a realisation that the law against sexual harassment has to be enforced with judicial sympathy and activism to protect women at the workplace.
  1. False Accusations by Women Employees
    Equally important is the need to caution the women employees that the SHWA contains a provision for punishment for false accusations or frivolous complaints by women employees. If the ICC arrives at a conclusion that the allegations were malicious or the aggrieved woman made the complaint knowing it to be false, it may recommend to the employer to take action against such employee. Further, if the person making the complaint has produced any forged or misleading document, such person may also be similarly proceeded against by the employer. Undoubtedly, this makes it imperative for the complainant to make out a strong case based on evidence and under proper professional advice to avoid inviting the charge of making a malicious complaint. However, the Act also states that a mere inability to substantiate a complaint or provide adequate proof need not attract action against the complainant under this section. This is a clear proof that the law makers wished to secure the complainant against any adverse consequences simply due to inability to substantiate a complaint or adequate evidence to support the charge. Further, as an additional safeguard to ensure that complainants are not simply harassed for frivolous complaints or acted against lightly, the Act provides that the malicious intent of the complainant shall be established after an inquiry in accordance with the procedure prescribed before any action is recommended. The procedure for such an inquiry would always ensure that the complainant is given fair chance to defend herself and to take legal recourse against vindictive proceedings or prejudicial action against her. The Act strikes a fine balance between discouraging malicious complaints by women so that male employees do not face false accusations of sexual harassment, but also recognises the difficulty of collecting evidence by women facing sexual misconduct. The Act is still to be seriously tested on this count but some cases of action against women under this provision have emerged.
  1. Legal Rigour– Duty to Act Judicially Finally, corporates have to recognise that complaints of sexual harassment cannot be treated as an empty formality. Once a complaint is filed, the proceedings have to be conducted by following the guidelines laid down in the Act and the Vishaka judgement by the Supreme Court. The inquiry into the complaint must proceed from the existence of a prima facie case of violation of the law and preliminary determination as to the existence of a case of sexual harassment, and then a more detailed investigation of the facts and the evidence adduced before the ICC. The ICC must bear in mind that they are vested with the duty to adjudicate upon the complaint, to indict the accused and to grant specific reliefs to the complainant. It has to decide the rights of the parties and therefore has a duty to act judicially. A whole body of case law exists which has crystalized the judicial principles that have to be observed by a committee which is investigating cases of complaints which may end in removal of the accused from service. The ICC must anticipate that the accused may if acquitted of the charge, could lead to the complainant appealing against their decision or even filed a criminal complaint as has happened in several cases. In either case, the taking and recording of evidence, giving opportunity to both sides to examine and cross examine witnesses, provide documents to the parties, and arrive at a finding of facts based on evidence, and eventually pronounce a reasoned verdict, are all mandated under the duty to act judicially. The decision is appealable and could also be challenged in writ proceedings before the High Court. A number of cases have already wound up before the High Courts, alleging glaring omissions in the ICC proceedings and consequently been quashed. Corporates must realise that the ICC is ultimately vested with the duty to act like a judicial authority and its decisions must meet the test of judicial scrutiny in appellate proceedings.


Ravi Singhania

10/7/2014 [socialsharesinghania]

Economic Rationale of FDI

Foreign Direct Investment (FDI) to India has been regarded as an important component of capital flows to supplement investible resources, to access advanced technologies for importing production know-how and for promoting exports. Being the more stable component of capital flows compared to Foreign Institutional Investor/portfolio investment and external commercial borrowings, it is admittedly the preferred means to finance the current account deficit. To achieve eight percent growth India must generate FDI rather than FII. In actual fact India attracted USD Twenty eight billion FDI in 2013 against USD Twenty four billion in 2012 shows a report of United Nations Conference on Trade and Development. Its position, as per the World Investment Report, 2014 slipped to fourth from second as the most attractive FDI destination after China in 2008 – 2010.

Factors that made India attractive not long back

Even as recently as last year, The United Nations Conference on Trade and Development (UNCTAD) in its World Investment Report 2013 had published the finding that India was one of the most attractive investment destinations as it had one of the largest markets even though growth had slowed down to 5% per annum. It had a pool of talented manpower and favourable demographics. An expanding middle class with rising urban and rural incomes were a key factor in attracting foreign investment. The services sector was likely to grow along with new sectors like aviation, defence and insurance. Even flows to the manufacturing sector were expected to increase as a number of countries including Japan and Korea were set to establish industry specific industrial zones in the Delhi-Mumbai Industrial Corridor. A major part of the FDI inflow has gone into telecommunication, automotive, construction and computer software and hardware sectors. A 2014 World Bank study ranks India as the World’s third largest economy in terms of its GDP after USA and China. State wide FDI flows into Maharashtra, Delhi, Karnataka, Gujrat and Tamil Nadu accounted for more than 75 percent of the aggregate inflows during 2000 – 12 . These States offered better infrastructural facilities and favourable business environment and an aggressive Government strategy to woo foreign investors. These States acted as enclaves to exert a disproportionate pull compared to the rest of India to secure FDI despite troubles in the world economy and the global slowdown.

Factors adversely impacting FDI

However, despite all its well-known advantages, why have foreign investors suddenly turned wary of investing in India? A Business Chambers’ review confirms the slow-down of inflows- its study of factors across major EMEs indicates that the recent investment climate in India has become increasingly difficult and perhaps is beginning to depress investor sentiment. Many of the Latin American and Asian countries saw a rebound in 2010, but due to a growing negative perception, FDI flows to India, which had reduced during 2009, continued to be modest during 2010 and 2012-13. Several factors have recently had a huge negative impact on the flow of FDI and the more significant ones are discussed below.

Delay in Implementation of Projects & Environmental Clearances

To the extent implementation of a project is delayed, it adds to its cost and competitiveness and may even make it economically unviable. Anecdotal evidence suggests that procedural delays affect the cross border flows of investible funds. Infrastructure projects in India carry significant risks associated with meeting government regulation, environment norms and legal requirements; inadequate user charges; and execution and construction risks. Industry surveys suggest that environment clearances, land acquisition and rehabilitation are the key issues that delayed large investment projects in the steel industry.

Bureaucratic hurdles

The time consuming systems and procedures to be complied with, the bureaucratic layers to be dealt with and the multiple bodies from which clearances are to be obtained – all add up substantially to the transaction costs involved and take up a lot of management time thus making it an issue of serious concern for the investors.

Solution: There is a report by reputed Indian Economists on Putting India Back on Track. The measures suggested to simplify and reduce the regulations which stifle entrepreneurship must be seriously implemented within a time frame of two years.
Retrospective Tax Amendments
The Vodafone related amendment to the Income Tax Act in 2012 has done a huge damage to India’s prospects for foreign investment. MNCs and investors have publicly declared that this one move alone has dealt a severe blow to the credibility of India as a country of predictable and stable policies.

Solution: The government must send out a strong and credible message that Retrospective Amendments will be repealed to restore the Supreme Court ruling in the Vodafone case and such amendments will be avoided in future. This alone will restore the faith of business and the investor community in the policy environment and tax regime of India.

Tax Disputes and outrageous demands

Litigation in tax cases involves astronomical sums in both direct and indirect taxes. As on June 2013 rupees 4.82 lakh crores are locked up in direct tax disputes and Rupee 1 lakh crore indirect tax disputes. The number of disputes pending before Commissioner Appeals, ITAT/CESTAT, HC’s and SC are staggering. Both Indirect Tax and Direct Tax Departments go in appeal to HC’s and SC for cases of Rupees 10 Lakhs and 25 Lakhs respectively. In transfer pricing cases alone tax demands involve Rupees Sixty thousand crores on adjusted income amounting to Rupees Two lakh crores to the income of the India entity of foreign companies.

Solution: Two things need to be done to cut down the volume of disputes. First the generation of demands must be curbed by getting C A G /Audit on board to settle paras in the Commissionerates. Secondly, after a critical analysis and review of the present level / volume, the demands must be cut down by a commission of three officers.

Corruption and Difficulty of doing business in India

According to the World Bank report India ranks 132 out of 185 countries in “Ease of Doing Business”. This is one area that strangulates businesses and acts as a major impediment to establishing start-ups, and is crying for reform of rules and regulations. To add to this is the rampant and all pervasive corruption in government departments which also adds to the cost of doing business in India.

Solution: It is no secret that the revenue department is in need of a drastic overhaul to restore integrity and impartiality as also the confidence to decide without fear or favour among its officers. The administrative measures to reform the ills of India’s tax department are highlighted in Dr Parthasarthi Shome’s Report on Tax Administration Reform Commission. The government already has a readymade set of recommendations on the table which need to be implemented as soon as possible. Implementation is the need of the hour.

Open up the FDI Policy & Implement Fast

The recent Budget has liberalised the FDI Policy by raising the current limits in the remaining sectors like Urban Construction, Insurance, Defence & even E-Commerce. The ceilings have been raised to 49% to begin with. All that India needs is to ensure that the raising of the current limits on foreign investment is done in a calibrated manner in these sectors and that transfer of technology in defence production is secured through Government of India’s understanding with foreign governments which control and regulate the issue of defence technology. The policy on multi brand retail may be kept in abeyance till such time as the economy revives and industrial growth generates employment. Perhaps the domestic retail sector still needs time to organise itself to meet foreign competition. Once India is back on the path of growth and jobs in the manufacturing sector begin to raise income levels and the SME sectors becomes stronger, may be the country will be ready to look more positively at the multi brand retail issue. To conclude, it is implementation alone that will revive the economy whether through FDI or through the domestic investment cycle and the solutions highlighted in this note will gradually encourage foreign investors. Currently, investors are poised on the threshold on the basis of expectations. Hopefully, market expectations wiil be buoyed up with Budget announcement on July 10, 2014.